Foreign Banks Seek Less Restriction Of Uninsured Units

WASHINGTON - Foreign banks operating uninsured wholesale bank branches and securities branches in the United States should be subject to fewer safeguards than insured institutions, international bankers told the House Banking Committee Tuesday.

The Glass-Steagall repeal bill sponsored by House Banking Committee Chairman Jim Leach would create a new class of investment bank holding companies that could own an uninsured wholesale bank affiliate along with a securities affiliate. The affiliates would be subject to less stringent firewalls then if the bank were federally insured.

However, foreign banks would be treated differently under the Leach bill. They would be treated as if they carried deposit insurance, and therefore be subject to higher firewalls.

Richard M. Webb, chief executive of Barclays Bank PLC's North America operations, argued that this is not fair to banks like his, which focus primarily on wholesale banking in the United States.

"Foreign banks that conduct only a wholesale, uninsured business in the United States (should) be accorded the same relief from this regulatory burden that similarly situated domestic banks will enjoy," Mr. Webb said.

Under the bill, HR 1062, wholesale financial institution and securities subsidiaries of an investment bank holding company would only have three major firewalls between them.

Sections 23A and 23B of the Federal Reserve Act would restrict the transactions between the affiliates, the wholesale bank would not be allowed to be federally insured, and the bank would also be banned from accepting deposits under $100,000.

"We recommend that ... an international bank that only has uninsured, wholesale branches or agencies in the United States could elect to be treated as an investment bank holding company," said Lawrence R. Uhlick, executive director of the Institute of International Bankers.

"As a result, all uninsured wholesale banking operations would receive the same regulatory treatment," Mr. Uhlick added.

Rep. Leach stressed that while the international bank representatives called for a concession on his bill, they were all in general agreement with the legislation.

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